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1986 (8) TMI 68
Issues Involved:
1. Whether Section 104 of the Customs Act, 1962, read with Sections 4(2), 436, and 437 of the Code of Criminal Procedure, 1973, empowers a Magistrate to remand to custody a person suspected of committing a non-bailable offence under the Customs Act.
Issue-wise Detailed Analysis:
1. Empowerment of Magistrate to Remand Custody under Section 104 of the Customs Act:
The core issue revolves around whether Section 104 of the Customs Act, in conjunction with Sections 4(2) and 437 of the Code of Criminal Procedure (CrPC), authorizes a Magistrate to remand a person suspected of a non-bailable offence under the Customs Act to custody. The court examined the language of Section 104 of the Customs Act and Sections 4(2) and 437 of the CrPC.
Section 104 of the Customs Act:
- Sub-section (1) empowers a Customs Officer to arrest a person suspected of an offence under Section 135.
- Sub-section (2) mandates that the arrested person be taken to a Magistrate without unnecessary delay.
- Sub-section (3) gives the Customs Officer the same powers as an officer-in-charge of a police station for the purpose of releasing the arrested person on bail or otherwise.
- Sub-section (4) states that offences under the Customs Act are non-cognizable.
Section 4(2) of the CrPC:
- States that all offences under any other law shall be investigated, inquired into, tried, and otherwise dealt with according to the provisions of the CrPC, subject to any special enactment regulating these processes.
Section 437 of the CrPC:
- Sub-section (1) allows a Magistrate to release on bail a person accused of a non-bailable offence unless there are reasonable grounds to believe that the person is guilty of an offence punishable with death or life imprisonment.
- Sub-section (4) mandates recording reasons for granting bail.
- Sub-section (5) allows the court to arrest and commit to custody a person previously released on bail if necessary.
Analysis:
The court noted that the Customs Act does not provide specific procedures for criminal trials or bail, thus invoking Schedule I of the CrPC. Offences under Section 135 of the Customs Act, punishable with imprisonment of three years or more, are non-bailable. The court emphasized that a Customs Officer, although having powers of arrest, is not a police officer, thus Section 167 of the CrPC does not apply.
The court rejected the argument that a Magistrate lacks the power to remand a person to custody before cognizance of the offence is taken. It was held that the refusal to grant bail inherently includes the power to remand to custody. This interpretation aligns with the purpose of the Customs Act, which aims to protect the fiscal and commercial interests of the nation by treating serious violations as criminal offences.
Precedent Analysis:
The court referred to various precedents, including:
- Ramesh Chandra Metha v. State of West Bengal, which clarified that a Customs Officer is not a police officer.
- Natabar Parida v. State of Orissa, emphasizing that courts have no inherent power of remand unless conferred by law.
- The Division Bench judgment in Dalam Chand Baid v. Union of India, which supported the petitioners' contention but was later dissented by the Gujarat High Court in N.H. Dave v. Mohmed Akhtar Hussain and the Kerala High Court in The Superintendent of Customs v. P.K. Umberkutty.
The court agreed with the Gujarat and Kerala High Courts' view that a Magistrate has the power to commit a person to custody under Section 437 of the CrPC when produced by a Customs Officer.
Conclusion:
The court concluded affirmatively that Section 104 of the Customs Act, read with Sections 4(2) and 437 of the CrPC, empowers a Magistrate to remand to custody a person suspected of committing a non-bailable offence under the Customs Act. The petition was dismissed as it lacked merit.
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1986 (8) TMI 67
Issues: Classification of stainless steel circles under Heading 73.15 (1) or 73.15 (2) of the Customs Tariff Act, 1975.
Analysis:
1. The petitioner argued that stainless steel circles imported by them should be classified under Heading 73.15 (1) instead of Heading 73.15 (2) as determined by the Authorities. The contention was based on the interpretation of the term "sheets" under Heading 73.15 (2) without any specific clarification in the Schedule. Reference was made to Note 'N' under Heading 73.13, which provides a specific meaning to 'sheets' or 'plates' of iron or steel. However, it was argued that the expression 'sheets' should not be narrowly interpreted to exclude circles, as Heading 73.15 encompasses alloy steel and high carbon steel, including stainless steel, in various forms.
2. The absence of any explicit restriction on the definition of 'sheets' in Heading 73.15 (2) led to the conclusion that stainless steel circles cannot be excluded from the category of 'sheets' and placed under Heading 73.15 (1). A similar argument was upheld by the High Court of Delhi in a previous case, emphasizing that the shape of the sheet, whether circular or otherwise, does not alter its classification as a sheet. The generic term 'sheet' encompasses various shapes, including circles, squares, and rectangles.
3. The principle of interpreting fiscal statutes in favor of the citizen was invoked by the petitioner's counsel to argue for a beneficial construction of the classification. However, the Court found no ambiguity in classifying stainless steel circles as 'sheets' under Heading 73.15 (2), thereby negating the need to apply the principle in this case.
4. Reference to analogous legislations and standards specifying stainless coils and circles separately was made by the petitioner's counsel to support their argument. However, the Court held that such comparisons were not relevant for interpreting the specific provision under consideration. It was reiterated that tax imposition or exclusion cannot be determined by analogy to other statutes.
5. Lastly, the Court dismissed the Writ Petitions, upholding the orders of the Authorities classifying stainless steel circles under Heading 73.15 (2). The judgment emphasized that the term 'sheets' under the said heading includes circles and rejected the petitioner's arguments regarding separate treatment of circles in other statutes or standards. The Writ Petitions were dismissed without costs.
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1986 (8) TMI 66
Issues Involved:
1. Withdrawal of Excise Duty Relief
2. Application of Promissory Estoppel
3. Legislative vs. Executive Actions
4. Retrospective Withdrawal of Notification
Issue-wise Detailed Analysis:
1. Withdrawal of Excise Duty Relief:
The petitioner challenged Notification No. 150/85-CE dated 15th July 1985, which rescinded earlier notifications granting excise duty relief. The petitioner argued that the withdrawal of excise relief, initially provided to encourage new investments in the tyre industry, was unjust as substantial investments were made based on the promise of such relief.
2. Application of Promissory Estoppel:
The petitioner contended that the government was estopped from revoking the excise exemption due to the principle of promissory estoppel. The petitioner relied on the Supreme Court's judgment in Union of India v. Godfrey Philips India Ltd., which stated that the doctrine of promissory estoppel binds the government in its executive functions. The court noted that the petitioner made significant investments based on the government's promise of excise relief, and it would be inequitable for the government to revoke such relief.
3. Legislative vs. Executive Actions:
The respondent argued that the power to grant or revoke exemptions was a legislative function, and thus, the principle of promissory estoppel did not apply. However, the court distinguished between primary legislation and subordinate legislation, holding that notifications issued under Rule 8 of the Central Excise Rules constituted subordinate legislation. Therefore, the government was bound by its promises made through such notifications.
4. Retrospective Withdrawal of Notification:
The petitioner argued that the notification rescinding the excise relief had a retrospective effect, which was impermissible. The court, however, did not delve deeply into this issue, as it had already concluded that the government was bound by promissory estoppel and could not revoke the relief granted.
Conclusion:
The court allowed the writ petition, quashing Notification No. 159/85-CE dated 15th July 1985. It held that the government could not revoke the excise relief granted by earlier notifications due to the principles of promissory estoppel. The parties were directed to bear their own costs.
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1986 (8) TMI 65
Issues:
1. Whether excise duty was payable on 'Dant Manjan Lal' manufactured by the petitioner.
2. Validity of the order dated 4th July, 1986, passed by the Assistant Collector, Central Excise.
3. Legality of the requirement for executing a bond and furnishing security for the release of seized goods.
4. Allegation of bias against the department leading to the seizure of goods on 17th February, 1986.
5. Permission to add a ground challenging the seizure of goods on 17th February, 1986.
Analysis:
Issue 1:
The petitioner manufactured 'Dant Manjan Lal,' and a question arose regarding the payment of excise duty. An initial order by the Assistant Collector of Central Excise deemed excise duty payable. Subsequently, an appeal was allowed by the Collector (Appeals) Central Excise, leading to a remand for fresh adjudication. The petitioner then filed a writ petition challenging the adjudication dated 19th February, 1986, for lack of a hearing opportunity. The High Court directed a fresh decision after hearing the petitioner, which was done on 4th July, 1986.
Issue 2:
The petitioner chose not to press for quashing the order dated 4th July, 1986, opting for an appeal instead. The Assistant Collector's decision to require a bond and cash security for the release of seized goods was based on Rule 206 of the Central Excise Rules, 1944, granting such authority. The Court found no jurisdictional error in this requirement and upheld the Assistant Collector's actions.
Issue 3:
The petitioner argued against the requirement for executing a bond and providing security, claiming lack of jurisdiction by the Assistant Collector. However, the Court upheld the legality of this requirement under Rule 206 of the Central Excise Rules, 1944, as authorized by law.
Issue 4:
Allegations of bias against the department were made, suggesting harassment of the petitioner. The Court found no specific allegations of personal bias against any officer and dismissed the inference of bias based on the department's conduct. The petition did not seek to quash the actual seizure of goods, focusing instead on the bond and security requirement, which was found to be within the Assistant Collector's authority.
Issue 5:
A request was made to add a ground challenging the seizure of goods on 17th February, 1986. The Court rejected this request, stating that without necessary averments and a prayer for quashing the seizure, adding such a ground would serve no purpose. Grounds in a writ petition must support specific reliefs, which was not the case here.
In conclusion, the High Court dismissed the writ petition, finding no merit in the petitioner's arguments. The Court upheld the legality of the Assistant Collector's actions regarding the excise duty, bond requirement, and seizure of goods, based on the relevant provisions of the Central Excise Rules, 1944.
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1986 (8) TMI 64
Issues:
1. Quashing of order passed by Assistant Collector of Customs
2. Release of 10 GP defective steel coils
3. Violation of natural justice in confiscation order
Analysis:
Issue 1: Quashing of order passed by Assistant Collector of Customs
The petitioner imported 113 GP defective steel coils, with 10 coils unloaded at Mangalore Port and the rest at Cochin Port due to a labor strike. The Assistant Collector of Customs issued a show cause notice for failure to clear the goods. The petitioner sought time for hearing but failed to appear on the scheduled date. The High Court held that the order of confiscation lacked natural justice as the petitioner was not given an opportunity for a personal hearing. The Court noted that the petitioner had obtained an order for the release of the remaining 103 coils in a separate case, indicating his willingness to comply with legal requirements. Therefore, the Court quashed the order of confiscation based on the violation of natural justice.
Issue 2: Release of 10 GP defective steel coils
The fate of the 10 GP defective steel coils was linked to the 103 coils released at Cochin Port. The Collector of Customs in Cochin had issued an order confiscating the goods but allowed redemption on payment of fines and penalties. The petitioner had filed a case in the High Court of Kerala for the release of the 103 coils and agreed to pay the imposed penalties and duties. Given that the petitioner was willing to comply with the conditions set for the release of the 103 coils, the Court directed the Assistant Collector of Customs in Mangalore to release the 10 coils subject to similar conditions, including payment of duties, bank guarantees, and security deposits.
Issue 3: Violation of natural justice in confiscation order
The Court emphasized the importance of affording the petitioner a fair hearing before confiscating the goods. It noted that the petitioner's claim of not receiving the communication for the scheduled hearing was plausible since no evidence was presented by the respondents to prove otherwise. The Court highlighted that the petitioner's proactive legal actions in the case of the remaining coils demonstrated his willingness to comply with legal procedures. Therefore, the Court concluded that the confiscation order was passed in violation of natural justice and directed the release of the 10 GP defective steel coils upon fulfillment of specified conditions.
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1986 (8) TMI 63
Issues Involved:
1. Levy and collection of excise duty on cigarettes.
2. Validity of the notification dated 2nd September 1985 and its amendments.
3. Consideration of the retail price versus adjusted sale price for excise duty calculation.
4. The applicability of Rule 8 of the Central Excise Rules, 1944.
5. The legality of the respondents' actions in equating actual retail price to adjusted sale price.
Issue-Wise Detailed Analysis:
1. Levy and Collection of Excise Duty on Cigarettes:
The petitioners, a company engaged in the manufacture and marketing of cigarettes, challenged the procedure followed by the excise authorities in levying excise duty based on the price at which retailers sell the cigarettes. The excise duty, as per the Central Excises and Salt Act, 1944, and the Additional Duties of Excise (Goods of Special Importance) Act, 1957, was initially on an ad valorem basis but later included specific duties. The petitioners argued that the excise duty should be based on the "adjusted sale price" as defined in the notification issued under Rule 8 of the Central Excise Rules, 1944.
2. Validity of the Notification Dated 2nd September 1985 and its Amendments:
The notification dated 2nd September 1985, as amended, provided for different slabs for excise duty based on the adjusted sale price per thousand cigarettes. The petitioners contended that the notification was irrational, impracticable, and created absurd situations where the excise duty could exceed the price of the product itself. Despite these arguments, the Court held that the notification, being legislative in character, could not be struck down on the grounds of being unworkable or absurd.
3. Consideration of the Retail Price versus Adjusted Sale Price for Excise Duty Calculation:
The petitioners argued that the excise authorities were unjustly considering the actual retail price instead of the adjusted sale price for calculating excise duty. They maintained that the adjusted sale price, as defined in the notification, should be the basis for excise duty, and any deviation from this was not warranted by law. The Court acknowledged the arguments but noted that the petitioners had been given liberty to challenge any final order passed by the respondents in earlier proceedings. Therefore, the Court did not delve into this issue in the current petition.
4. The Applicability of Rule 8 of the Central Excise Rules, 1944:
Rule 8 of the Central Excise Rules, 1944, empowers the Central Government to exempt any excisable goods from the whole or part of the duty leviable. Sub-rule (3) allows for the levy of duty at a rate expressed in a form or method different from the statutory duty. The petitioners argued that the adjusted sale price was not a permissible measure under Rule 8. However, the Court held that the term 'valuation' in the explanation to sub-rule (3) could include the adjusted sale price, making the method used in the notification permissible.
5. The Legality of the Respondents' Actions in Equating Actual Retail Price to Adjusted Sale Price:
The petitioners contended that the respondents' actions in considering the actual retail price for excise duty valuation were illegal. They argued that the excise duty should be based solely on the adjusted sale price as printed on the cigarette packets, as per the notification. The Court found these arguments weighty but reiterated that the petitioners could challenge the final order in separate proceedings, as previously allowed.
Conclusion:
The petitioners failed to establish that the notification dated 2nd September 1985, as amended, was invalid. The Court discharged the rule with no order as to costs, leaving the petitioners to challenge any final order passed by the respondents in separate proceedings.
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1986 (8) TMI 62
Issues:
1. Interpretation of Notification No. 55/75 dated March 1, 1975 regarding the exemption from excise duty on the import of Phenol USP.
2. Determination of whether Phenol USP qualifies as a drug or a drug intermediate for the purpose of exemption from countervailing duty.
3. Requirement for the importer to establish the actual use of the imported material as a drug or drug intermediate for availing exemption benefits.
Analysis:
The judgment pertains to a petition filed under Article 226 of the Constitution of India by a partnership firm engaged in importing chemicals, specifically Phenol USP. The firm contested the imposition of countervailing duty by the Assistant Collector of Customs, claiming exemption under Notification No. 55/75 dated March 1, 1975. The key issue was whether Phenol USP qualifies as a drug or a drug intermediate as per the notification to be exempt from duty.
The court examined various evidences presented by the petitioners, including references to Pharmacopoeias of India, Britain, and the United States, certificates from laboratories, and a circular issued by the Central Board of Excise and Customs. The material indicated that Phenol USP was recognized as a drug or a drug intermediate in the pharmaceutical industry, supporting the petitioner's claim.
The department, represented by learned counsel, argued that the exemption required proof of actual use as a drug or drug intermediate, beyond mere branding. Additionally, reliance was placed on the dictionary meaning of "intermediate" to challenge the classification of Phenol USP. However, the court dismissed these arguments, emphasizing that the notification did not impose additional requirements beyond the substance being classified as a drug or drug intermediate.
Ultimately, the court held in favor of the petitioners, declaring that the import of Phenol USP was not liable for countervailing duty under the Customs Tariff Act. The ruling granted relief to the petitioners, discharged their obligations under interim orders, and did not award costs due to the circumstances of the case.
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1986 (8) TMI 61
Issues Involved:
1. Entitlement to proforma credit under Rule 56-A of the Central Excise Rules, 1944.
2. Interpretation of Rule 56-A and its provisos.
3. Compliance with interim orders and tax liability.
Issue-wise Detailed Analysis:
1. Entitlement to Proforma Credit Under Rule 56-A:
The primary question was whether the petitioner company was entitled to proforma credit under Rule 56-A of the Central Excise Rules, 1944, for the inputs cement and asbestos raw (fibre) used in manufacturing asbestos cement products. The petitioners argued that they were entitled to this credit because the finished products were notified by the Central Government under Rule 56-A(1) and thus should benefit from the proforma credit procedure under Rule 56-A(2). The petitioners' application for this credit was rejected by the competent authority on the grounds that the inputs and outputs did not fall under the same tariff item.
2. Interpretation of Rule 56-A and Its Provisos:
The court examined the historical and current provisions of Rule 56-A. Initially, Rule 56-A was introduced to allow credit of duty paid on materials or component parts used in manufacturing specified excisable goods. The proviso to Rule 56-A(2) stipulated that credit would not be allowed unless the duty on the materials or component parts was paid under the same tariff item as the finished excisable goods or unless remission or adjustment of duty was specifically sanctioned by the Central Government. The court concluded that the entire scheme of Rule 56-A, including its provisos, must be read harmoniously. The proviso enacts a "no credit rule" that applies unless the specified conditions are met, ensuring that the proforma credit procedure is not misapplied.
3. Compliance with Interim Orders and Tax Liability:
The petitioners initially received interim relief, restraining the respondents from refusing proforma credit, but later felt aggrieved by the respondents' non-compliance with these interim orders. The court noted that the interim relief was subject to certain conditions, including the furnishing of bank guarantees. Upon dismissal of the petitions, the court addressed the issue of accrued tax liability and the need to protect public revenue. The court extended the interim relief for six weeks, subject to additional conditions, including furnishing further bank guarantees and an undertaking to pay interest on arrears of excise duty.
Conclusion:
The court held that the petitioners were not entitled to proforma credit under Rule 56-A because the inputs used did not fall under the same tariff item as the finished excisable goods, and no specific sanction for remission or adjustment of duty was granted. The court emphasized the need for a harmonious interpretation of Rule 56-A and its provisos. The petitions were dismissed, and interim relief was extended for six weeks with additional conditions to protect public revenue. The court refused the petitioners' request for leave to appeal to the Supreme Court, finding no substantial question of law of general importance.
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1986 (8) TMI 60
Whether this expression `duty of excise' is limited in its connotation only to basic duty of excise levied under the Central Excises and Salt Act, 1944 or it also covers special duty of excise levied under various Finance Bills and Acts, additional duty of excise levied under the Additional Duty of Excise (Goods of Special Importance) Act, 1957, and any other kind of duty of excise levied under a Central enactment?
Held that:- The Central Excise Laws (Amendment and Validation) Act, 1982 is merely declaratory of the existing law and hence its constitutional validity cannot be assailed.
Allow the appeals and dismiss the writ petition. We set aside the judgment of the High Court and hold that under the Notifications dated 8th November, 1967, 1st August, 1974 and 1st March, 1981 the respondents in the appeals and the petitioners in the writ petition are entitled to exemption only in respect of the basic duty of excise leviable under the Central Excises and Salt Act, 1944 and are not entitled to claim any exemption in respect of special duty of excise or additional duty of excise or auxiliary duty of excise.
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1986 (8) TMI 59
Issues Involved:
1. Validity of orders passed under Section 116 of the Customs Act, 1962.
2. Interpretation of Section 116 of the Customs Act in context of transhipped goods.
3. Applicability of penalties imposed for short-loading during transhipment.
Detailed Analysis:
1. Validity of Orders Passed Under Section 116 of the Customs Act, 1962:
The petitioners, a private limited company acting as shipping agents, challenged the orders passed by the respondents under Section 116 of the Customs Act, 1962, arguing that the fines imposed should be refunded. The petitioners contended that the orders were not warranted by the provisions of Section 116. The facts showed that the vessel m.v. LUKITA, due to a strike at Colombo, discharged part of its cargo at Colombo and returned to Bombay with the remaining cargo. The Master of the ship mistakenly handed over the import manifest, including cargo already discharged at Colombo, to the Port Authorities at Bombay. This led to a perceived shortfall in the cargo meant for transhipment to Colombo.
2. Interpretation of Section 116 of the Customs Act in Context of Transhipped Goods:
The petitioners were given an opportunity to provide evidence that certain cargo had indeed been discharged at Colombo. However, they failed to procure the necessary material from Colombo Authorities in a reasonable time. The Assistant Collector of Customs imposed penalties on the petitioners through five orders dated 23rd March 1976. The Court examined whether Section 116 was applicable in this context. The section was split into three parts for analysis:
- Goods loaded for importation into India, transhipped under the Act, or coastal goods.
- Goods not unloaded at their destination in India or short of the quantity to be unloaded.
- Applicability of ensuing provisions of Section 116.
3. Applicability of Penalties Imposed for Short-Loading During Transhipment:
The Court found that the act of unloading or short-loading must occur at a destination in India for Section 116 to apply. The term "destination" refers to the final place where the goods were to be unloaded, which in this case was Colombo, outside India. The Court noted that Section 54 of the Customs Act distinguishes between transhipment to domestic ports (sub-section 3) and international ports (sub-section 2). Section 116 applies only to transhipments within India under Section 54(3). Therefore, the transhipment of goods destined for Colombo (outside India) under Section 54(2) is not covered by Section 116.
The Court concluded that the penalties imposed under Section 116 were illegal as the goods' ultimate destination was outside India. The proceedings and penalties were quashed, and the petition was allowed with no order as to costs. The petitioners were permitted to withdraw any deposited amounts pursuant to the Court's orders.
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1986 (8) TMI 58
Whether the royalty levied by the impugned notification No. JAD/FOR/68/26 Dated, Jowai, April 20, 1968 can be realised by the District Council in respect of trees in private forests?
Held that:- The notification in unambiguous terms says that the royalty shall be on the squared log pines. It has no reference to the land on which those trees have grown.
The appellants have not been able to establish that the impugned royalty was leviable under any other provision. It was no doubt true that it was argued before the High Court that it was open to the District Council to levy fees as quid pro quo for the services rendered by it to the forest owners or contractors. The High Court erred in holding that even fees could not be levied under paragraph 3 of the Sixth Schedule to the Constitution. We have already held that even though there is no express provision to levy such fees, the District Council can levy fees under paragraph 3. But that would not save the notification since there is no material placed before the court to uphold the notification on that ground. No evidence is placed before the court showing the expenses incurred by the District Council towards the services rendered and the total amount of royalty realised by it. Appeals fail but, we, however, set aside the finding of the High Court that no fees can be levied by the District Council in respect of matters enumerated in paragraph 3 of the Sixth Schedule to the Constitution.
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1986 (8) TMI 57
Whether the dismissal in limine of a special leave petition filed before this court by a party challenging the award of Labour Court would preclude the said party from subsequently approaching the High Court under article 226 of the Constitution seeking to set aside the said award?
Held that:- The grant of leave under article 226 of the Constitution is undoubtedly in the discretion of the High Court but the exercise of that discretionary jurisdiction is to be guided by established legal principles. It will not be a sound exercise of that discretion to refuse to consider writ petition on its merits solely on the ground that a special leave petition filed by the petitioner in the Supreme Court had been dismissed by non-speaking order.
Allow this appeal, set aside the order of the High Court and remand the writ petition to the High Court for disposal on the merits. Having regard to the fact that the case concerns the service benefits claimed by the third respondent, the High Court is requested to dispose of the writ petition as early as possible
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1986 (8) TMI 56
Whether a court while hearing writ petitions is under an obligation to pass a speaking order?
Held that:- It is a cardinal principle of rule of law which governs our policy that the Court including Writ Court is required to record reasons while disposing of a writ petition in order to enable the litigants, more particularly the aggrieved party, to know the reasons which weighed with the mind of the Court in determining the questions of facts and law raised in the writ petition or in the action brought. This is imperative for the fair and equitable administration of justice. Every quasijudicial order must be supported by reasons.
Appeal is allowed and the judgment and order passed is hereby set aside. The court below is directed to dispose of the said writ petition in accordance with law after giving hearing to the parties and by passing a speaking order
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1986 (8) TMI 55
Issues:
1. Conflict between two Division Bench decisions regarding the partition of Hindu undivided family property.
2. Whether the karta, as the sole surviving coparcener, can effect partition of the family property between himself and his wife.
Analysis:
1. The case involved a conflict between two Division Bench decisions of the High Court regarding the partition of Hindu undivided family property. One decision held that a wife cannot claim partition as a matter of right, while the other decision allowed partition by the coparcener. The Full Bench was constituted to resolve this conflict (S. P. GOYAL J., 14-11-1985).
2. The Full Bench analyzed the rights of the wife in the Hindu undivided family property. According to Hindu law, female members have no share in the joint family property and are entitled to maintenance only. The court held that in a family with only one male member, no partition is possible, as the sole owner cannot divide the property. The court endorsed similar views from other High Courts (S. P. GOYAL J., 13-8-1986).
3. The Full Bench reviewed the two Division Bench decisions. In one case, a partial partition was upheld as the family had multiple coparceners, entitling the wife to a share. In the other case, the court overruled the partition as the family had only one coparcener, making partition impossible. The court emphasized that the sole owner cannot effect a partition of the property (S. P. GOYAL J., 13-8-1986).
4. The Full Bench considered additional judgments cited by the parties but found them distinguishable as they involved families with more than one coparcener. Ultimately, the Full Bench overruled one decision and held that in a family with a sole surviving coparcener, partition with the wife is not possible (S. P. GOYAL J., 13-8-1986).
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1986 (8) TMI 54
Issues involved: Interpretation of provisions u/s 37 of the Income-tax Act regarding entertainment expenditure and deduction of business expenditure.
Summary:
The High Court of Karnataka addressed a reference u/s 256(2) of the Income-tax Act regarding the treatment of expenditure incurred by a public limited company during a visit by a Japanese delegation and expenses related to a general body meeting. The company claimed the entire amount as deduction under "Business expenditure," but the Income-tax Officer allowed only a portion as "entertainment expenditure." The Commissioner (Appeals) increased the allowance, which was upheld by the Tribunal.
Regarding the first question, the Court analyzed whether the additional sum allowed by the Commissioner was justified under sub-section (2A) of section 37 of the Act, which pertains to entertainment expenditure provided to employees. The Court found that the allocation of 50% towards expenses incurred on employees accompanying the delegation was reasonable and not arbitrary, thus ruling in favor of the assessee.
Moving on to the second question, the Court considered the expenditure related to the general body meeting. While a previous decision held such expenses as administrative or business expenditure, the introduction of Explanation 2 to sub-section (2A) of section 37 broadened the definition of entertainment expenditure. As per Explanation 2, expenditure on hospitality to any person other than employees is considered entertainment expenditure. Since the expenditure in question was for entertaining shareholders, it fell within this definition, leading the Court to rule in favor of the Revenue.
In conclusion, the Court upheld the allowance of additional expenditure related to the Japanese delegation but disallowed the deduction for expenditure on the general body meeting under the expanded definition of entertainment expenditure in Explanation 2 of section 37.
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1986 (8) TMI 53
Issues:
Challenge to orders passed by Central Board of Direct Taxes and Income-tax Officer under sections 107A and 104 of the Income-tax Act, 1961.
Analysis:
The petitioner, a film distribution and exhibition company, was required to distribute 90% of its distributable income as dividend. Despite having distributable income of Rs. 2,18,016, the company distributed only Rs. 1,69,964, falling short by Rs. 26,251. The Income-tax Officer issued a notice under section 104 asking for an explanation. The company had earlier applied to the Central Board of Direct Taxes for a reduction in the minimum distribution, citing development needs. The Board rejected the application, leading to additional tax levied by the Income-tax Officer.
The petitioner argued that the burden lies on the Revenue to prove the dividend declared was unreasonable. They contended that the commercial profits, not assessable income, should be considered for dividend declaration. The company had undertaken significant renovation projects and new cinema hall constructions, requiring substantial funds, justifying the lower dividend declaration. The Supreme Court precedent highlighted that the Income-tax Officer must consider business factors like previous losses, present profits, and future requirements in assessing dividend reasonableness.
The court found that the Income-tax Officer's order was non-speaking and did not demonstrate a consideration of relevant factors or compliance with Supreme Court guidelines. The Department's argument against the maintainability of the petition under article 226 was rejected due to the appeal bar under section 107A(9). The court criticized the Department for not filing a counter-affidavit despite ample opportunities and failing to produce necessary records during proceedings. Ultimately, the court quashed the impugned orders, holding that the Income-tax Officer had not properly applied his mind to the case as required by law.
In conclusion, the court ruled in favor of the petitioner, quashing the orders passed by the Central Board of Direct Taxes and the Income-tax Officer. Each party was directed to bear their own costs.
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1986 (8) TMI 52
The High Court of Madhya Pradesh directed the Tribunal to refer two questions of law to the court regarding the set off of disclosed income against addition to income for a specific assessment year. The Tribunal was asked to consider whether the entire disclosed income could be set off against the addition and whether dividing the disclosed income into four equal parts for different assessment years was justified.
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1986 (8) TMI 51
The High Court of Allahabad directed the Income-tax Appellate Tribunal to refer three questions of law to the court for its opinion. The questions relate to the date of transfer, capital gain exemption, and the nature of payments made for tube-well and standing trees.
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1986 (8) TMI 50
The High Court of Allahabad directed the Income-tax Appellate Tribunal to refer question No. 1 regarding entertainment expenditure for the court's opinion. Questions 2 and 3 were dismissed as they were deemed not to be questions of law arising from the Tribunal's order.
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1986 (8) TMI 49
The High Court of Allahabad dismissed six applications by the Commissioner of Income-tax related to partial partition relief in assessment years 1975-81. The court held that the decision in Daya Shanker Vijay Kumar v. CIT was binding on the Department until reversed by the Supreme Court. No question of law arose. No costs were awarded. (1986 (8) TMI 49 - ALLAHABAD High Court)
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